Category: zerohedge

Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

Another month, another flight to Hamad international airport for 17^th April after initial agreement to hold ‘upstream horses’ in February 2016. While it’s no doubt great fun getting back into the OPEC ‘masters of the oil universe’ routine, second time round, the stakes are rapidly rising in Doha given another supposed ‘freeze’ announcement would actually be read as outright OPEC / Russia failure without clear signals the market will see actual cuts. That opens a very complex can of worms for what’s at stake here. We’ll do OPEC politics first, followed by market ‘realities’ second. On both counts, timing is crucial. And bluntly put, OPEC couldn’t have picked a worse window for another ad hoc meeting.

Leading up to Doha, market expectations will inevitably grow for some kind of cut that’s likely to put a few dollars on the barrel. Ironic given this remains a classic case of OPEC / non-OPEC heavyweights ‘talking peace, but preparing for war’ in terms of longer term volumes strategies. Obviously it’s all bluff for now, but the fact Kuwait claims it can do 3.2mb/d, Iraq has inched up to 4.8mb/d, Venezuela is holding firm at ‘2.6mb/d’, while Russia is full steam ahead at 10.9mb/d serves as a reasonable proxy for where everyone is likely to go in a low price environment; volumes plays. Iran has certainly made clear it’s insisting on pre-sanction production levels before it’s even willing to sit at the OPEC table. Nobody was ever realistically going to hold that against Iran given market problems everyone else has got themselves into this far down the line. But in the interim, the key space to watch on 17^th April is whether the market’s been asking all the wrong questions over cuts to date. Forget Russian ‘honey-potting’ OPEC to try and announce collective supply cuts purely to gloss over deep-seated Russian depletion problems, where Moscow can’t keep 10.9mb/d pace indefinitely. Rather, if any cuts are announced, the smarter market analysts won’t read this as a ‘pro-active’ GCC measure, but start asking whether the GCC has potentially played Russia at their own ‘honey-potting’ game.

Just as Russia is pumping for all it’s worth, a number of ‘MENA’ players are probably struggling to maintain January 2016 production levels as well. Depletion ‘necessity’ gets sold to the market as ‘virtuous’ cuts in Doha. The smaller the cuts, the greater the suspicion that OPEC is taking a leaf out of Russia’s book to try and cover depletion problems with supply side action. While that’s certainly an outside possibility, our overall take is unless things are far worse than anyone’s currently letting on upstream, the Doha meetings are far more likely just to see ongoing ‘freeze agreements’ remain in place. If so, prices will very quickly unravel after the 17^th meeting given it’s basically just a license to pump whatever producers have. For all the political smoke, the market will see straight through the Doha haze, with highly reflective mirrors.

That’s fair enough if the entire exercise basically amounts to a waste of OPEC-Russian geopolitical time, but the problem is it’s far from a ‘no regrets’ option when it comes to market realities. Again, that’s based on two very clear time distinctions before and after the meeting. Both of which could prove costly for the producer group. Leading up to Doha, this is the worst possible time for OPEC to be talking a record short oil market up to $45/b given it’s one of two vital ‘redetermination’ windows in April and October when vast tranches of US shale production comes up for refinancing / access to credit facilities for smaller independent players. With longs unconvinced OPEC is serious, all it takes is for shorts to have booked enough profit for oil to resume its decline.In ballpark terms, it accounts for around 3.2mb/d worth of total US production. Production that would stand absolutely no chance of getting new credit lines if prices were hovering around $30/b at this stage of the cycle, given $34bn of previous loans (aka 15% of the $276.5bn total lent in 2015 to US players) was already deemed ‘substandard or doubtful’.

Reserve Based Lending

In a world where debt is subsidised and equity penalized capital intensive industries like oil exploration and production are naturally drawn toward debt products to fund their operations. In the new brave world of shale oil production frontier companies with limited access to bond markets rely more on traditional bank credit in the form of standing facilities to secure ample cash flow.

Banks obviously want unencumbered collateral to back up such credit facilities hence the concept of reserve based lending. In other words, banks use a company’s reserve report, independently approved by third parties, as basis for their credit lines. Needless to say, reserve valuation can be hard to determine with accuracy, so to guard against committing to a changing market environment most credit facilities are re-determined twice a year.

The net present value of a proved developed producing reserve (PDP) can be pledged as collateral for credit facilities. This valuation obviously depends on discount rates, production volumes, expected prices and other costs. If any of these input variables changes between re-determination periods the value of the collateral changes accordingly and banks can change the credit facility.

As the stylized example below depicts, the borrowing base will decline with production (natural decline rate of the field) and grow as new reserves are added. The fear nowadays is that the creeping perception of ‘lower for longer’ will prompt banks to reduce standing credit facilities just when the shale complex is most at risk of running out of cash.

Our analysis show that more than 3 mb/d of liquid production helped by US$55.5bn in credit facilities may be at risk as the spring re-determinations starts in April. It all comes down to the price deck used for reserve valuations. A 50 per cent increase in oil prices from mid-February thus provide ample ammunition for shale companies arguing their credit facilities should not be cut too much. 

 

Acreage would have to be shut in; producers would have to consolidate or fold; with impairments felt across the US board.

However, at $45/b (probably nudged above $50/b on forward expectations), not only will these players get another six months credit lifeline prolonging the ‘market rebalancing’ agony, the Fed / White House will be pressing banks / lenders extremely hard again to keep the tight oil party going given that gets them all the way to November 2016 US Presidential polls. In the so called ‘shale vs. sheikh’ battle, OPEC is talking the market up at the exact time when it should be letting prices collapse.

Make no mistake, the race to put shale pen to refinancing paper before 17^th April is now categorically on in the US, before the creaky Doha floor potentially collapses. By looking at speculative positions in the WTI market it is clear the recent rally has been unconvincing. Long positions hardly budged as prices rallied; coincidently with shorts being covered at an unprecedented pace. This was nothing more than the worst possible timed short squeeze. As the rally now comes to an end, expect prices to drop conspicuously, just as banks make their redetermination decisions on US$40 – 50 oil as compared to US$20 – 30 one month hence. Adding insult to OPEC injury, a flattening contango (we did say longs were unconvinced didn’t we) is destined to flood the market with stored crude, pushing prompt price down just enough to incentivize renewed inventory builds repeating the pattern ad infinitum. Killing shale softly is not the way to go. Aim for $10 /bbl and get the V-shaped recovery that just might save marginal OPEC countries from internal havoc.    

And that brings us to the final point which ultimately leads us onto longer term OPEC post-Doha ‘strategy’. On the one hand, OPEC already showed its interim hand from February meetings that it’s largely unwilling (or unable) to decimate prices below $20/b by increasing volumes to kill US shale. It’s the only chance the group has to orchestrate a classic ‘V shape’ recovery; buying more time to get fiscal houses in order back at elevated prices. Rather, what the freeze discussions essentially do, is make sure if US shale won’t ultimately budge at $40/b, it ensures a long and painful ‘U shape’ recovery where more fragile OPEC producers start blowing out instead on the back of depressed prices.

Whether the likes of Venezuela, Nigeria and Iraq understand that’s exactly what they’re signed up for, or whether they start to apply far more pressure on KSA and Russia to ‘put up or shut up’ on actual cuts, remains to be seen. For the very biggest OPEC players, backing US shale out remains plan A. But the longer supply side discussions go on, the more likely it is ‘plan B’ will have to do; killing smaller OPEC states / production. For those able to stay the course, quietly building up volumes in the background, then the eventual returns could be very lucrative when the time’s right. But Doha doesn’t make for a quick kill. It merely prolongs the agony far deeper and far longer. Perhaps for some, that’s the redemptive point from US redetermination…

via Zero Hedge http://ift.tt/1okjj6Y Tyler Durden

We will be the first to admit that in the current centrally-planned world, where nothing but the words and deeds of central bankers matter, fundamentals, seasonals, technicals and charts are a laughable anachronism from days gone by when the market – as traded by humans and not vacuum tubes with laser beams – could drop 10% without the Federal Reserve collapsing into a panicked mess.

However, there are those who still believe that what used to work in the past still does, and trade according to the patterns observed in the Trader’s Almanac.

While that is clearly folly (as it does not account for what any given central banker had for dinner the night before – a key variable in this “New Normal”, ridiculous age) for their benefit we point out something curious about the month of April, traditionally the strongest month of the year… except during presidential election years, when it slides from the best month to the second worst.

Additionally, as Evercore ISI technician Rich Ross points out, there are several other patterns which suggest that, in the absence of central bankers, one would be advised to trade, and tread, carefully in the coming months. 

This is what Ross writes in a note explaining why he maintains his defensive, bearish stance:

We transition from the best 6 month stretch for the S&P since 1950 into the worst 6 month stretch which commences in May. Moreover, while April has been the best month for the Dow over the past 65 years (+2.0%)… 

 

 

… during Presidential Election Year’s April falls from a 1 seed to an 11 seed with an average loss of .9% according to the Stock Trader’s Almanac (Jeffrey Hirsch).

 

Hirsch also notes that “prior to President Obama, there have been six previous presidents that served an eighth year in office…. and in those eighth years the DJIA and S&P have suffered average declines of -13.9% and -10.9% respectively (Only 1988 was positive).”

 

… our defensive game plan is dictated not only by seasonal trends and presidential patterns, but by the presence of overhead resistance and long term moving averages which loom ominously overhead countertrend rallies within the context of structural downtrends. Defense wins championships, and right now it’s “cheap” on the charts.

Of course, we prefaced this by saying “in the absence of central bankers”, which unfortunately will not be the case until the grand reset, and as a result there is absolutely no way of knowing what will happen either in April or for the rest of 2016, now that the Fed has given up pretending it is “data-dependent” and admits it is all about propping up the inflated stock bubble as long as possible.

via Zero Hedge http://ift.tt/1qfpo6v Tyler Durden

Submitted by Patrick Buchanan via Buchanan.org,

I am “not isolationist, but I am ‘America First,'” Donald Trump told The New York times last weekend. “I like the expression.”

Of NATO, where the U.S. underwrites three-fourths of the cost of defending Europe, Trump calls this arrangement “unfair, economically, to us,” and adds, “We will not be ripped off anymore.”

Beltway media may be transfixed with Twitter wars over wives and alleged infidelities. But the ideas Trump aired should ignite a national debate over U.S. overseas commitments — especially NATO.

For the Donald’s ideas are not lacking for authoritative support.

The first NATO supreme commander, Gen. Eisenhower, said in February 1951 of the alliance: “If in 10 years, all American troops stationed in Europe for national defense purposes have not been returned to the United States, then this whole project will have failed.”

As JFK biographer Richard Reeves relates, President Eisenhower, a decade later, admonished the president-elect on NATO.

“Eisenhower told his successor it was time to start bringing the troops home from Europe. ‘America is carrying far more than her share of free world defense,’ he said. It was time for other nations of NATO to take on more of the costs of their own defense.”

No Cold War president followed Ike’s counsel.

But when the Cold War ended with the collapse of the Soviet Empire, the dissolution of the Warsaw Pact, and the breakup of the Soviet Union into 15 nations, a new debate erupted.

The conservative coalition that had united in the Cold War fractured. Some of us argued that when the Russian troops went home from Europe, the American troops should come home from Europe.

Time for a populous prosperous Europe to start defending itself.

Instead, Bill Clinton and George W. Bush began handing out NATO memberships, i.e., war guarantees, to all ex-Warsaw Pact nations and even Baltic republics that had been part of the Soviet Union.

In a historically provocative act, the U.S. moved its “red line” for war with Russia from the Elbe River in Germany to the Estonian-Russian border, a few miles from St. Petersburg.

We declared to the world that should Russia seek to restore its hegemony over any part of its old empire in Europe, she would be at war with the United States.

No Cold War president ever considered issuing a war guarantee of this magnitude, putting our homeland at risk of nuclear war, to defend Latvia and Estonia.

Recall. Ike did not intervene to save the Hungarian freedom fighters in 1956. Lyndon Johnson did not lift a hand to save the Czechs, when Warsaw Pact armies crushed “Prague Spring” in 1968. Reagan refused to intervene when Gen. Wojciech Jaruzelski, on Moscow’s orders, smashed Solidarity in 1981.

These presidents put America first. All would have rejoiced in the liberation of Eastern Europe. But none would have committed us to war with a nuclear-armed nation like Russia to guarantee it.

Yet, here was George W. Bush declaring that any Russian move against Latvia or Estonia meant war with the United States. John McCain wanted to extend U.S. war guarantees to Georgia and Ukraine.

This was madness born of hubris. And among those who warned against moving NATO onto Russia’s front porch was America’s greatest geostrategist, the author of containment, George Kennan:

“Expanding NATO would be the most fateful error of American policy in the post-Cold War era. Such a decision may be expected to impel Russian foreign policy in directions decidedly not to our liking.”

Kennan was proven right. By refusing to treat Russia as we treated other nations that repudiated Leninism, we created the Russia we feared, a rearming nation bristling with resentment.

The Russian people, having extended a hand in friendship and seen it slapped away, cheered the ouster of the accommodating Boris Yeltsin and the arrival of an autocratic strong man who would make Russia respected again. We ourselves prepared the path for Vladimir Putin.

While Trump is focusing on how America is bearing too much of the cost of defending Europe, it is the risks we are taking that are paramount, risks no Cold War president ever dared to take.

Why should America fight Russia over who rules in the Baltic States or Romania and Bulgaria? When did the sovereignty of these nations become interests so vital we would risk a military clash with Moscow that could escalate into nuclear war? Why are we still committed to fight for scores of nations on five continents?

Trump is challenging the mindset of a foreign policy elite whose thinking is frozen in a world that disappeared around 1991.

He is suggesting a new foreign policy where the United States is committed to war only when are attacked or U.S. vital interests are imperiled. And when we agree to defend other nations, they will bear a full share of the cost of their own defense. The era of the free rider is over.

Trump’s phrase, “America First!” has a nice ring to it.

via Zero Hedge http://ift.tt/1VS1FFs Tyler Durden

Presented with no comment…

 

 

Source: The Burning Platform

via Zero Hedge http://ift.tt/1V1TIN6 Tyler Durden

Submitted by Jeffrey Anderson WeeklyStandard.com,

Three years ago, on the eve of Obamacare’s implementation, the Congressional Budget Office (CBO) projected that President Obama's centerpiece legislation would result in an average of 201 million people having private health insurance in any given month of 2016. Now that 2016 is here, the CBO says that just 177 million people, on average, will have private health insurance in any given month of this year – a shortfall of 24 million people.

 

Indeed, based on the CBO's own numbers, it seems possible that Obamacare has actually reduced the number of people with private health insurance. In 2013, the CBO projected that, without Obamacare, 186 million people would be covered by private health insurance in 2016—160 million on employer-based plans, 26 million on individually purchased plans. The CBO now says that, with Obamacare, 177 million people will be covered by private health insurance in 2016—155 million on employer-based plans, 12 million on plans bought through Obamacare's government-run exchanges, and 9 million on other individually purchased plans (plus a rounding error of 1 million).

In other words, it would appear that a net 9 million people have lost their private health plans, thanks to Obamacare—with a net 5 million people having lost employer-based plans and a net 4 million people having lost individually purchased plans.

None of this is to say that fewer people have "coverage" under Obamacare—it's just not private coverage. In 2013, the CBO projected that 34 million people would be on Medicaid or CHIP (the Children's Health Insurance Program) in 2016. The CBO now says that 68 million people will be on Medicaid or CHIP in 2016—double its earlier estimate. It turns out that Obamacare is pretty much a giant Medicaid expansion.

To be clear, the CBO—which has very generously labeled Obamacare's direct subsidies to insurance companies as "tax credits," even though sending money to insurers doesn't lower anyone's taxes—isn't openly declaring that Obamacare has reduced the number of people with private health insurance or that it has doubled the number of people on Medicaid or CHIP. Rather, the CBO maintains that Obamacare has actually increased the number of people with private health insurance by 9 million and has increased the number of people on Medicaid or CHIP by (just) 13 million. But it would seem that the only reason the CBO can make these claims is that it has moved the goalposts.

That is, the CBO has significantly altered its estimates for what 2016 would have looked like if Obamacare had never been passed. In 2013, the CBO projected that, in the absence of Obamacare, 186 million people would have had private health insurance in 2016, and 34 million people would have been on Medicaid or CHIP. The CBO now maintains that, in the absence of Obamacare, only 168 million people would have had private health insurance in 2016 (a reduction of 18 million people from its 2013 projection), while 55 million people would have been on Medicaid or CHIP (an increase of 21 million people from its 2013 projection). Somehow the hypothetical non-Obamacare world has changed a lot in the past three years. (The CBO doesn't explain how this could have happened.)

Even the CBO's revised figures for a non-Obamacare world, however, can't gloss over the fact that Obamacare has failed to hit its target for private health insurance by 24 million people. To see that, one must simply compare Obamacare's new tally of 177 million to its 2013 target of 201 million.

The CBO doesn't release retroactive scoring of Obamacare. Try finding, for example, tallies from the federal government (whether from the CBO or otherwise) on what Obamacare has actually cost so far. Rather, the CBO is like a handicapper who predicts the results of horseraces, but then never bothers to publish the races' actual results.

Now that it's clear enough, however, that Obamacare is basically an expensive Medicaid expansion coupled with 2,400 pages of liberty-sapping mandates, it's time for a winning Obamacare alternative to emerge, one along the lines of what Ed Gillespie almost rode to victory in the Virginia Senate race. Such an alternative should address the longstanding inequity in the tax code—between employer-based and individually purchased insurance—while adhering to four basic notions:

1. It shouldn't touch the tax treatment of the typical American's employer-based plan.

 

2. It should close the tax loophole on the employer side—which says that the more you spend (on insurance), the more you save (in taxes)—by capping the tax exclusion at $20,000 for a family plan (while letting anyone with a more expensive plan still get the full tax break on that first $20,000).

 

3. It should offer a simple tax break for individually purchased insurance that isn't income-tested and thus doesn't pick winners and losers (in marked contrast with Obamacare, which is all about picking winners and losers.)

 

4. It shouldn't provide direct subsidies to insurance companies like Obamacare does. (The federal government provides a tax break for mortgage interest paid—it doesn't directly pay a portion of people's mortgage bills. Likewise, it shouldn't directly pay people's health insurance bills as if it were some kind of "single payer.")

In addition, anyone crafting an Obamacare alternative should keep this important point in mind and express it publicly: Far from being the gospel truth, the CBO's scoring is more like a wild guess that will never be checked against future reality.

via Zero Hedge http://ift.tt/1SkyNAa Tyler Durden

In recent weeks, Goldman Sachs has gained prominence by being the only bank left standing in its confidence that the Fed’s forecast of 2 rate hikes in 2016 is wrong, and instead is sticking with its hawkish prediction of at least 3 rate hikes for 2016. This also explains why Goldman has been pounding the table on long US dollar bets, which incidentally have led to major losses in the past three major central bank announcements, two from Mario Draghi and one from Yellen.

Which is why we were curious how Goldman would reconcile the latest “dovish” shocker from Yellen which has unleashed a dramatic buying spree of all risk assets (as of this moments the S&P500 is trading at a 23x LTM GAAP P/E), with Goldman’s hawkish bias.

For those strapped on time, this is the summary: stocks are currently surging because the Fed is “less confident it can normalize rates” and sees a “weaker global growth environment.”

What can one say: perfectly new normal.

Here is the full note:

Yellen Comments Emphasize Downside Risks

Bottom Line: Fed Chair Janet Yellen emphasized downside risks to the US economic outlook stemming from slower global growth in a dovish speech at the Economic Club of New York. Yellen highlighted the weaker global growth environment coupled with the FOMC’s “asymmetric” capacity to respond to economic shocks as the key reason for the Committee’s lower path for the funds rate in March. On inflation, Yellen acknowledged that that core inflation had risen “somewhat more” than she expected in December, but said it is “too early to tell if this recent faster pace will prove durable” and expressed concern about downside risks arising from lower inflation expectations.

Main Points:

1. In a speech to the Economic Club of New York, Fed Chair Janet Yellen took a positive view of recent US growth and employment gains, while emphasizing both current weakness in the US manufacturing and export sectors and downside risks to the outlook. In particular, Yellen expressed concern about the impact of the earlier tightening in financial conditions, slower growth globally and in China in particular, and uncertainty surrounding China’s exchange rate policy.

2. Yellen acknowledged that core inflation had risen “somewhat more than my expectation in December,” but said “it is too early to tell if this recent faster pace will prove durable,” in part because “earlier dollar appreciation is still expected to weigh on consumer prices in the coming months.”

3. Yellen expressed concern that “inflation expectations may have drifted down,” pointing to both the Michigan consumer survey and market-based measures of inflation compensation. Using the 1970s as an analogy, Yellen noted that stable inflation expectations cannot be taken for granted. However, she also noted that the Michigan measure has in the past responded to declines in gasoline prices and therefore might currently be “unreliable” as a guide to trend inflation. While Yellen said she views inflation expectations as still well anchored, if that view is wrong then “a more accommodative stance of monetary policy” might be required to return inflation to the target.

4. Yellen said that recent changes in economic conditions, especially developments abroad, “imply that meeting our objectives for employment and inflation will likely require a somewhat lower path for the federal funds rate than was anticipated in December.” Pushing back against the argument that the FOMC’s March projections for the funds rate represented a change in the reaction function, Yellen instead attributed the shift to the weaker pace of global growth. She emphasized the need to “proceed cautiously in adjusting policy,” noting that “caution is especially warranted” because the FOMC’s ability to respond to shocks with the funds rate close to zero is “asymmetric.”

5. Yellen noted that a number of Fed models imply that the real neutral rate is still close to zero. She attributed this in part to headwinds facing the economy, including weak foreign growth, the strong dollar, slow household formation, and weak productivity growth. While Yellen said she still expects these headwinds to “gradually fade” and for the neutral rate to rise as a result, she noted that “this assessment is only a forecast” because “no one can be certain about the pace at which economic headwinds will fade,” a somewhat less confident take on future neutral rate normalization.

6. Responding to concerns that central banks have run out of policy space, Yellen said that FOMC still has “considerable scope to provide additional accommodation” should it prove necessary. She also noted that the FOMC’s data-dependent approach “serves as an important ‘automatic stabilizer’ for the economy” because incoming data surprises tend to induce offsetting “changes in market expectations about the likely future path of policy.”

* * *

Next, we await to see how long before Goldman finally throws in the towel on its “long dollar” trade.

via Zero Hedge http://ift.tt/25uFSrC Tyler Durden

While real estate is all about "location, location, location," it appears there are sometimes more prescient factors that any prospective buyer should pay attention to. Amid yet another government-fueled housing bubble, it seems in their haste to fulfil a rapacious demand for property in which to gamble their hard-grafted assets, Chinese construction companies have cut a few corners. As the following stunning video shows, a "newly constructed apartment" crumbles before the owners' eyes as the 'concrete' walls turn to sand…

LiveLeak exposes, in the following video, just how poor the standards can be of so-called “new” properties. LiveLeak footage shows two men in a supposedly “new apartment building” in China where the concrete walls crumble like sand.

China is currently in the midst of a huge property bubble…

 

And the country is full of “ghost cities” and new apartment blocks waiting to be filled. Which is no surprise considering that China used about 6.4 gigatons of cement during their construction boom between 2011 and 2013, which is more than what the US used during the entire 20th century. However, those housing properties in China are frequently not built to stand the test of time: In 2010, officials revealed that many homes had a lifespan of just 20 years.

Just like buying worthless companies in the stock market bubble ended very badly, it appears buying 'worthless' homes is set for the same outcome…

 

Quick everyone back into stocks!!

via Zero Hedge http://ift.tt/22YGUK7 Tyler Durden

While it remains unclear how far, if anywhere, the lawsuit against Trump campaign manager Corey Lewandowski will go, who as reported earlier was charged with battery of former Breitbart reporter Michelle Fields during an altercation in early March, one thing is clear: he will remain in his post. According to The Hill, citing campaign spokeswoman Katrina Pierson, the Trump campaign “will stand by campaign manager Corey Lewandowski.”

“The allegation is that he grabbed her aggressively, nearly throwing her to the ground,” Pierson said. “That did not happen, its not on the video, and Mr. Lewandowski will be cleared of all charges.” When CNN host Wolf Blitzer asked whether Lewandowski would remain in his position if he did not “beat” the charge, Pierson said he would.

“Yes, absolutely. Mr Lewandowski is an integral part of this team, the camp wholeheartedly supports him and will see him through the entire ordeal,” she said.

She added that it’s common for people to be “jostled or moved or hit” in media scrums both by campaign officials and members of the media, and compared the altercation to when she received a cut on her arm from a news camera during a scrum, and floated the possibility of restricting access to the press in response. 

“You could start suing networks now for slashing your arm with a camera, which happened in my case. This is absurd, it is ridiculous and it will be beat,” she said. “If anything, perhaps campaigns, particularly presidential campaigns, should begin to change the rules of the type of access the press gets from here on.”

Meanwhile, The Hill also reported that a lawyer representing Lewandowski resigned from his post as a U.S. attorney in 1996 after he allegedly bit a stripper at a Miami nightclub.

Kendall Coffey, who was appointed by President Clinton in 1993, stepped down after the Justice Department concluded an investigation into the nightclub incident, according to reports from the time. Coffey, a founding partner of the law firm Coffey Burlington, then returned to private practice. 

He was involved in the high-profile custody battle of Elian Gonzalez in 2000.

Additionally, Coffey’s law firm is representing Trump in a suit he brought against Doral, Fla., residents living near one of his golf courses. Trump is accusing the residents of chopping down trees on the course’s property.

All this assures that the media circus surrounding what is already the most entertaining presidential race in decades, is not going anywhere.

via Zero Hedge http://ift.tt/1RIrK3I Tyler Durden

From ISIS marches in Germany to refugees “doing normal manly things” to women in Sweden, UKIP leader Nigel Farage confronts Angela Merkel and her peers in the European parliament over their dreadfully misguided immigration policies.

“Europe is burning,” he exclaims, adding that – just like the central-bankers of the world – their solution is insanely simple-minded: “Europe isn’t working, so we must have more Europe.” The only hope lies, he adds, in the British referendum showing the rest of Europe it is possible to take back control of its own borders.

 

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Submitted by Dwayne Purvis via OilPrice.com,

Props to Saudi Arabia. Unlike other producers, including U.S. shale producers, it maintained financial strength and flexibility during the last boom. When it began to shift the paradigm of global supply, the kingdom was explicit about its goal – market share – even if it didn’t always trumpet the proactive steps it was taking towards that goal. The now-evident objective of low prices, having been achieved and sustained, begs the question of why Saudi Arabia defended its market share.

The position of Saudi Arabia among producers in 2014 resembled the position of Germany in the European Union in prior years. Both had maintained financial strength despite the prodigal habits of other members, and both were called upon to make unique sacrifices to rescue their neighbors. Germany had closer ties to its partners and seemed to see the ultimate benefit of helping. Perhaps because it didn’t have such ties, Saudi seems to have weighed the benefits differently. Indeed, Saudi had no moral obligation or economic need to sacrifice itself in order to redirect wealth to other producers.

Their actions suggest that they intended to drive prices toward a basement price—stepping supply up when prices reached the $60s, slowly tuning it down when prices hit the $40s and below, and increasing its capacity for production even as prices fell. The recent address of Saudi Oil Minister Ali Al-Naimi in Houston was straightforward and polite, but it might be crudely paraphrased as, ”Get used to the low prices. Adapt or die.”

The possibility of his bluffing is belied by historical actions. As recently as Monday, the OPEC report on monthly volumes showed the kingdom continuing to produce more than half a million barrels a day above its rates in late 2014. Saudi Arabia has had the will and means to drive prices, giving market forces some push.

As oil has been its only resource and industry of value, the kingdom has treated the business as the treasure that it is. The centuries-long fate of the royal family and its kingdom depends upon how they manage themselves during the era of oil, particularly the epoch of increasing demand. Surely, the highly intelligent, disciplined and motivated planners knew the short-term consequences of the actions which the rest of the world is just beginning to appreciate fully. And even last month, Minister Al-Naimi professed the acceptability of $20 oil.

Normally the benefit of market share is obvious—increased revenue and increased performance. This assumes, however, stable prices and economies of scale. If one maintains market share, or even gains a few percent, but prices drop by 50 or 70 percent, then revenue drops to half or a third of what it had been. Said differently, the Saudis could have absorbed all of the increasing production from the rest of the world, dropped their production by half to about 5 million barrels per day (mb/d) and still have had the same or more revenue than they have enjoyed during this transition. Market share is not its own reward. Evidently Saudi Arabia has some strategic plan that results in its making more money in the long run than it is losing in the short run.

Perhaps the Saudis view ‘market share’ not just in terms of oil production but in terms of total energy use. By 2014 shale oil had posted an acute rise in supply, and other high-cost sources like oil sands were building momentum. Natural gas and renewables were tracking their own, chronic ascent. Moreover, the high cost of oil created incentives toward alternatives, both unconventional oil and non-oil forms, and global demand growth for liquid oil was forecast to grow below historical trends due to conservation and lesser economic activity. Minister Al-Naimi has said that oil demand would peak long before supply. Before the current price crash, that peak demand was within sight, perhaps 2040 give or take a decade. High prices were slowly killing the goose that lays the golden eggs.

If the strategic focus on market share does not involve increased revenue or efficiencies, then the market power is the only compelling explanation for the strategy. With power they can perhaps maximize their own decades-long revenue stream rather than passively treat their national treasure as a cash cow, perhaps exerting some control over their own destiny rather than ceding to less economically rational sources.

The new paradigm of supply/demand balance seems to have at least two major tenants: Price should be low enough to discourage run-away supply and perhaps to encourage the use of oil. Saudi Arabia may cooperate but will not unilaterally support prices. Around these pillars are two routes back to prices which can sustain long-term supply: slow rebalancing as supply slides and demand creeps, with cooperation for widespread cuts. Or prices could recover by a challenge to the new paradigm, namely conflict to threaten or to interrupt even a small portion of supply.

A freeze in production growth as headlined in the last month would be a mostly irrelevant step on the first route or a minor step towards the second route. The large majority of OPEC production comes from countries not able or not inclined to increase production. With Iran still adamantly and publicly opposed, the idea of a freeze in supply growth is more publicity than policy change. Perhaps the most important take-away is that Saudi Arabia has signaled that its floor price is somewhere above $30.

Even if cooperation cannot be achieved, the rest of the world may not remain a hapless victim of Arabian pricing power. Oil consumers may appreciate the drop, but countries like Russia and Iran do not. They also have motives and objectives similar to those of Saudi Arabia; they desperately need oil revenue. Only they have different forms of power at their disposal to influence oil price.

via Zero Hedge http://ift.tt/1RO8hVv Tyler Durden